Behind The Deal: 1200 Bay St Sold To Dutch Investors
The office-retail tower at 1200 Bay St was just sold for $86.75M to Amsterdam-based investors by the building's original developers. Paracom Realty Corp SVP Jordan Karp, co-broker of the deal, tells us how it came together.
The mid-century building was bought by ProWinko Canada and Kroonenberg Groep, both privately owned Dutch real estate firms. Situated on the northwest corner of Bay and Bloor Street West, “one of the most important and coveted corners in Canada,” says Jordan, the 12-storey, 100k SF tower had never been up for sale before. Its owners, the same group that developed 1200 Bay back in 1966, were approached by buyers many times in the past “but really had no interest” in selling. Until last year, Jordan notes, when a major Canadian REIT made an unsolicited offer for the building, followed by an overture from a private developer for “considerably more money."
That's when things got real. Realizing the time was right to sell, 1200 Bay's owners tapped Jordan and Paracom VP Ryan Morein, who assembled a list of about 25 parties “most likely to pay a price that recognized the inherent values of this iconic corner.” Also important was that any purchaser take a long-range view on 1200 Bay. “We didn't want someone looking to get in, make a few changes, and get out.” The property received close to a dozen formal bids—from private, institutional, local and foreign buyers alike—before ultimately being awarded to ProWinko and Kroonenberg.
Jordan says the goal was to beat the cap rate achieved in the 2014 sale of 150 Bloor St W to Ponte Gadea Group for $254.5M—a 4.2% cap rate. And they succeeded: the $86.75M paid for 1200 Bay represents a 3.24% cap rate, he notes. While 1200 Bay's new owners aren’t planning to demolish the tower, a repositioning of both its office and retail—in the heart of Toronto’s famed Mink Mile—promises to deliver considerable upside, according to Jordan. “This is a prime corner, coming up Bay Street the sightlines for retailers are impeccable.” Meantime, 1200 Bay’s new owners will invest in common area upgrades to give the building a more contemporary feel.
Longer term, ProWinko and Kroonenberg are seeking to establish 1200 Bay as the No. 1 office property in the Bay-Bloor node, Jordan tells us. ProWinko also owns 110 Bloor St W (above), but the 1200 Bay deal marks Kroonenberg’s first Canadian real estate investment. Other bidders could’ve matched the price, but Jordan says the building's vendors went with the Dutch investors because of the reputation of its principals and their pledge to treat 1200 Bay’s tenants, suppliers and building employees with respect, “not come in and exercise termination rights right away to make a bit more money.”